The Truth About Peter Thiel's Massive Facebook Selloff And His Board Seat (FB)

Nicholas Carlson, provided by

Published 6:35 am, Wednesday, September 5, 2012

In late August, Facebook board member Peter Thiel sold 20.6 million of his 26.2 million shares in the company.

Thiel also sold 16.8 million shares during Facebook's May 18 IPO.

Thiel was Facebook's first outside investor, and seeing him sell 87% of his remaining stake in the company's first provoked two big questions:

Is Thiel planning to stay on Facebook's board?

Is Thiel bearish on Facebook's future?

Both Facebook and Thiel declined to comment on this story.

But after speaking with several sources close to Facebook and Thiel, we have some answers to those questions.

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For starters: According to a source familiar with his thinking, Thiel plans to stay on Facebook's board for the next few years at least.

Why?

For Thiel, the appeal of being on Facebook's board is obvious. As one source who has discussed Facebook with him put it, "Is it that bad to be on the board of a $40 billion company?"

No, it is not that bad. Especially for a startup investor like Thiel, who gets good deal-flow thanks to his high profile.

Maybe Thiel would step down from Facebook's board if he were bearish about the company's long term prospects. But, in answer to our second big question, we have been told by multiple sources close to him that he is not.

According to one source familiar with Thiel's thinking, he is, like almost everyone who watches Facebook closely, worried about its ability to monetize on mobile, where most of its users are migrating and the company shows fewer ads at the moment.

But this source also says that Thiel believes Facebook users are going to stick around in the long term because of Facebook's strong network effects. In other words he believes you won't quit using Facebook so long as that's where all your friends and family puts their pictures, and they won't leave for the same reason.

Other sources close to Thiel say the truth is that he isn't particularly bearish or bullish on Facebook. These sources say he doesn't talk about it much, and is focusing more on new projects and startups.

The implication being that he wants to use some of the capital he had locked up in Facebook to invest in new things.

In general, it was difficult to pin down sourcing on why Thiel sold so much, but one source who has discussed the issue with Thiel pointed us to Fred Wilson's take.

In a post on his blog, Wilson wrote: "Those who took the risk of losing all the capital they bet on 20 year old Mark Zuckerberg are entitled to their return. And they will get it. And anyone who thinks otherwise has their head in the sand."

So: Thiel wants to stay on the board because it will help his career, he's bullish on the company, even if it's fate is not a great concern of his life anymore.

Make sense.

What's harder to imagine is why Facebook, CEO Mark Zuckerberg, and Facebook's other board members would want to keep Thiel on the board.

They won't admit it (Facebook declined to comment on this story) but Thiel almost certainly embarrassed the company and his fellow board members by unloading so much of his stake so fast.

Obviously the company would have preferred that Thiel do what two other high profile board members did yesterday; Don Graham and Marc Andreessen announced they would, for the next year, only sell enough Facebook stock to cover their taxes on the holdings.

So why isn't Facebook throwing Thiel off the board?

A source close to Thiel's thinking says he believe his value to the company is that he has been on the board for eight years, and that he has deep institutional knowledge that will help the company in the years ahead.

It has also been reported over the years that Facebook CEO Mark Zuckerberg values Peter Thiel's infamously contrarian perspective.